Older Workers Win One, For Now

April 6th, 2005 | Paula Brantner

Last week, the Supreme Court finally decided the issue of whether the Age Discrimination in Employment Act (ADEA) allows groups of older workers to bring what are known as “disparate impact” cases, in the case of Smith v. City of Jackson. While the decision was positive in that it did not rule these types of cases out completely, it will most likely be unclear for a while exactly what types of cases employees will be able to win based upon this decision.

It’s hardly paranoid to believe that there is discrimination out there that is subtle enough that it is difficult to prove legally. As Laurie McCann of the AARP points out, before last week’s ruling, job seekers filing a lawsuit “would have had to prove that the employer crafted that policy because they wanted to screen out older workers. That proof of intent is very hard to come by even if it was there. You’d be very lucky if in discovery you found the memo or something that said that was their intent.” (See New York Daily News article.)

One of the ways that lawyers have been able to ferret out discrimination has been to bring what is known as a “disparate impact” case. Rather than having to prove that someone in a position of authority intended to discriminate against the employee bringing the case, using a disparate impact theory allows groups of workers to show that a particular policy more adversely affects a protected group than a comparable non-protected group of workers.

For example, there are a number of cases where African-Americans have been able to show they were adversely affected by a testing or promotional process. Rather than showing that someone administering the test created it for the purpose of screening out African-Americans, those affected could show that the process weeded out African-Americans in numbers disproportionate to their participation in the process. This prevents companies from developing seemingly-neutral policies, but nonetheless using them to screen out certain groups of employees. However, race discrimination is evaluated under a different law, Title VII, than age discrimination, which is made illegal by the ADEA. The Supreme Court had not yet spoken on whether age discrimination cases could be brought as disparate impact cases, and lower courts around the country were divided on whether it was legally possible to do so.

For older workers, disparate impact issues often arise in mass layoff or “reduction-in-force” situations, where the group of those laid off contains more older workers, and the group of those retained contains more younger workers. Another common situation involves the interplay of years of service and salaries. Since years of service often, but not always, correlates with age, it can be tricky to determine whether a particular practice tied to years of service serves as a proxy for age discrimination.

That was the situation in Jackson, Mississippi, where the city made salary decisions based upon years of service. The City recognized that it would be unable to bring in as many less-experienced workers at the salary level it was offering, and so raised salaries for workers with five years or fewer experience at a greater percentage than salaries for workers with more than five years experience. The goal was to bring starting salaries in line with other departments in the region, so that the department could remain competitive in hiring. There was perhaps even an unspoken assumption that if someone had remained with the department for five years or more, that officer was more likely to remain loyal, despite the salary, and stick with the department to take advantage of seniority and accrued benefits, rather than starting over somewhere else. While there were some officers over 40 that had been with the department less than five years and thus received a greater pay increase, most of those over 40 had enough experience that they received the lesser increase.

A group of employees over 40, unhappy with their pay scale, claimed that the City’s move was discriminatory on the basis of age. They claimed both disparate treatment and disparate impact, claiming that the City intended to discriminate against older workers, but even if it didn’t intend to do so, the City’s policy still had an adverse impact on the older officers. None of the lower courts agreed, and rejected their case at the trial court and appellate court (the 5th Circuit Court of Appeals.) However, the lower courts, in doing so, rejected the idea that the officers could bring a disparate impact case, so they appealed to the U.S. Supreme Court, both to see if the Court would overturn the result, and also to resolve the conflict between courts over the applicability of the disparate impact theory.

This case represents how fractured some of the Court’s decisions can be. All eight justices participating (Chief Justice Rehnquist, who has been ill for several months, did not participate) agreed that the officers did not successfully prove their case. However, the justices sharply disagreed about why that was. Five justices (Stevens, Souter, Ginsberg, Breyer, and Scalia (the most surprising vote)) agreed that plaintiffs could not prove their case, but did agree that other older employees should be allowed to bring an ADEA lawsuit using the disparate impact theory. However, Scalia chose different reasons to reach his conclusion in favor of disparate impact claims than the other four justices. The other three justices (Thomas, Kennedy, and O’Connor) dissented, arguing that the disparate impact theory should not not be recognized under the ADEA.

Why did the older officers lose? One reason why the ADEA is different from Title VII is that an exception is permitted for “reasonable factors other than age” or RFOA. The RFOA exception takes into account that there are factors which often closely correlate with age, but are not the same as age itself, such as years of experience and seniority. This exception takes into account that unlike with race, age may have “relevance to an individual’s capacity to engage in certain types of employment.” The majority of those voting on the Court believed that the City of Jackson, in taking seniority and rank into account when determining pay scales, was relying on a reasonable factor other than age.

However, in making the disparate impact theory available for other people to use, the Court recognized language in both the ADEA (borrowed from Title VII) and its prior Title VII rulings that assumed that disparate impact claims were available. Since these types of cases have been ruled to be permissible under Title VII, and the ADEA’s language was similar, the Court reasoned that they should be available under the ADEA as well. Justice Scalia took a different tack. He reasoned that the theory should be available, for the additional reason that the EEOC, the government agency with authority to interpret the ADEA, the Equal Employment Opportunity Commission, had already interpreted the law to include disparate impact claims. He accordingly thought that the courts should defer to that interpretation. His opinion seems to have been written for the purpose of disagreeing with Justice O’Connor’s dissent, as several paragraphs have Justice O’Connor’s dissent as the focus of their contrary analysis.

In the dissent, Justice O’Connor argues that neither the text of the ADEA nor the EEOC’s interpretation of the law are sufficient to indicate that Congress intended to include disparate impact claims when passing the ADEA. The dissent claims that there are enough significant differences between the ADEA and Title VII to warrant against adopting the disparate impact theory, merely because it had been successfully adopted in Title VII cases.

For now, workers can bring disparate impact cases, and still attempt to show that the policies and practices adopted by employers are not “reasonable factors other than age.” This is certainly preferable to not being able to make the argument at all. As Laurie McCann of the AARP notes, “The good thing is that any time (employers) craft a policy, they’re going to have to take a look at it and make sure it doesn’t have a disparate impact on older workers. That’s a good thing … they’re going to have to review all their policies and practices and see if they have a statistical impact on older workers. They’re already doing that for race and gender.” (See New York Daily News article.)

However, it remains to be seen what kinds of policies courts will strike down because they do not represent RFOAs. It may very well include, as one commentatory suggested, “layoffs that seem to target higher-salaried employees or those soon eligible for retirement benefits. Or an employment test that measures computer skills — something older workers tend to have less of — when the position at hand doesn’t require using a computer. ” (See San Francisco Chronicle article.)

Or the case may simply make it so that employers can successfully defend most cases by claiming “business necessity,” which the Court recognizes is a RFOA. One article suggests that “the decision will change how cases are argued, but the balance of power between employers and their older employees may well stay the same. And age-discrimination cases will remain difficult to win.” (See Miami Herald article.)

It will be up to older workers and their advocates to fight back when policies adversely affect them without harming younger workers in the same way. Given that more than half of our workforce is already over 40 — 75.8 million Americans — and will be over 40 for many years to come, there will likely be ample opportunities to test the strength of the Supreme Court’s opinion.